How Did the Economic Crisis Influence New Firm Creation?: A Multilevel Approach Based Upon Data from German Regions

There is a broad consensus that the likelihood of becoming an entrepreneur is not only influenced by individual characteristics but also by spatial context conditions. However, context factors are not per se stable; they tend to vary over time which is particularly relevant during economic cycles. In Germany, for instance, the rapid economic downturn of 2008/2009 was preceded by a period of growth and followed by an economic upswing in many regions. However, the impact of this crisis on entrepreneurship has not been empirically studied comprehensively. Using data from the Global Entrepreneurship Monitor (GEM), we analyse entrepreneurial activities in the 39 German NUTS2 regions covering a 13-year period before, during and after the Great Recession of 2008/2009. Applying multilevel regression techniques, we hypothesize that both space and time matter for individual entrepreneurial behaviour. Our results show, first, that space and time can be regarded as two interrelated dimensions that jointly impact entrepreneurial activities. Second, similar individual attributes are associated with diverging likelihoods of becoming an entrepreneur in case individuals are nested in different regions or different time periods and are thus exposed to dissimilar context conditions. Third, the type and number of individual, context and interaction effects are motive-related, i.e. they depend on whether the entrepreneurial action is either opportunity-driven or necessity-driven.